Elon’s Paycheck, Toast Robots, Short Ideas, And Much More
Here’s the transcript from today’s Live Q&A Chat:
First, let’s address the elephant in the chat room — the Rocket Lab (RKLB) sell. Look, I hate selling it. I’ve had a lot of money, ego and time wrapped up in Rocket Lab and selling it was not an easy decision. But I can think of two very straightforward concepts of mine that apply here — The hardest trade is usually the right one AND emotions are the enemy of a good investor. So checking my emotions, checking how upset I know selling Rocket Lab will make some of my Trading With Cody subscribers, checking how much I still believe that The Space Revolution is going to be a trillion-dollar business for decades to come — I knew and know that stepping away from Rocket Lab for at least a while is the right decision. I can always buy it back someday.
Q. Market seems way overbought here. I believe that was your sentiment yet you added this new one today?
A. I’ve already raised a bunch of cash and raised more today by selling Rocket Lab (RKLB). I am starting a new position in Toast (TOST) and the ideal setup would be for the market to tank here and to take TOST down 10-15% with it and for us to scale in and make this a medium-sized position over the next few weeks or so.
Q. Cody – Can you please provide your thoughts on 4 out of 5 Americans saying they’re cutting back on fast food and calling it a luxury they can’t afford? The Big Mac has gone from $3.99 pre-pandemic to over $8.
A. I’ve been saying all year that the low-income consumer in the US is struggling and that the middle-income consumer is feeling squeezed. Food inflation has been terrible for the last few years and rates are higher and gas prices aren’t cheap and home/rent prices are through the roof. On the other hand, the top 20% of people who are not cutting back on fast food or calling it a luxury they can’t afford make up a much bigger chunk of the overall economy than the 80% on the other side.
Q. How important is the pay package to Elon Musk and how does the decision play into the future success of the company?
A. It’s pretty important. And he deserves it. And it’s BS that some judge somewhere won’t let us honor what we shareholders promised Elon years ago before he helped that company deliver everything it delivered in sales growth, stock price, etc.
Q. With that being said how does one hedge their Tesla (TSLA) posiiton for the possibility of an unfavorable outcome? Or should it be sold and wait for the decision to get back in?
A. I’m not selling it before/because of that vote. I might buy a few puts at some point to hedge it a bit.
Q. Where is NVIDIA (NVDA) in 5 years feet-to-fire?
A. Feet-to-fire in five years, I think NVDA could be between $500 and $2500 (hopefully closer to the higher number).
Q. Great call with NVIDIA (NVDA)! Can you please let me know which covered calls you wrote?
A. The August $900s and the September $1080s.
Q. Any more color on Uber Technologies (UBER) as we have been waiting for your analysis?
A. Yes, I’m thinking that we are going to stick with UBER here. The company could really have a good quarter and year and we probably shouldn’t assume that Tesla’s Robotaxi (Cybercab) is going to be an existential risk to Uber until we see Tesla doing the Cybercabs in at least a city or two (which is probably going to happen sometime next year).
Q. Toast (TOST) is being used in many restaurants in Manhattan.
A. I’ve seen Toast POS at restaurants about 30% of the time lately. That’s partly the bull thesis in my mind: getting into restaurant with this hardware is the loss leader and margin damager, and it’s the recurring revenue from these business that will drive earnings and margins higher in the out years.
Q. Isn’t the restaurant business sickly across the whole country?
A. It’s not boom time for the restaurants but I’m not sure it’s sickly either. The restaurant industry has been secularly growing for the last few decades, as revenues in the industry have gone up 5x over the last 30 years.
Q. Is Toast (TOST) an AI play?
A. They are certainly using AI increasingly in their business and I think they could end up building AI into their point-of-sale hardware and eventually even have robots taking food from kitchen to table at some restaurants. A few months ago in NYC, I was having sushi with Neil Patrick Harris and we ordered some sake on the POS screen at our table and a robot soon rolled out to our table and opened its chest up, and voila, out slid a bottle of sake and a couple glasses. That’s going to become much more commonplace and turnkey and Toast could be part of that in a few years.
Q. What rating and holding size would you give Toast (TOST)?
A. I’d give it a 8/10 and am planning to make it a medium-sized position over the next few weeks or so.
Q. Feet-to-fire, where is TransMedics (TMDX) in 5 years?
A. Feet-to-fire, I think TMDX could be somewhere between $50 and $400, hopefully closer to the higher number.
Q. Two major mea culpa’s in Intel (INTC) and Rocket Lab (RKLB).
A. Yes, indeed. I put a lot of faith, ego, goodwill and money into each of those names and it was not easy to sell them. But it is incredibly freeing to not feel stuck in losers that I haven’t made money in and to still own the big winners that we have.
Q. Intel (INTC) is a big loser for me. Yet, I was wondering about timing and how soon INTC fabrication plants were going to SAVE America from our reliance on China invading Taiwan etc. What can you share that you learned about POUNDING the table for INTC and now selling it…ouch !
A. It’s probably 2-3 years away from Intel ramping up their new fab business. I might be back into Intel by then. We’ll see.
Q. Any quick takes on Applovin (APP), Salesforce (CRM) & ServiceNow (NOW)?
A. They are all expensive on our models, but they are all great companies. CRM is the cheapest but it’s far from cheap and I’ve no position in any of them.
Q. Feet-to-fire on Salesforce (CRM) earnings tonight?
A. I think they’ll miss and the stock will be down 4.279% tomorrow at noon and will close down 4.105%. Haha. No idea, really.
Q. Shopify (SHOP) looks like it’s bottomed. Any thoughts?
A. It’s a good company. We have it modeled out with a topline growth of about 15% for the next 5 years with 50% gross margins and minimal expense growth but it still comes out at about a 16 Price-to-Profits ratio five years out, which isn’t terribly cheap.
Q. Dell Technologies (DELL) has remained a winner since we parted ways with it. Is it worth another look?
A. Yeah, I should have kept the DELL. Our timing was pretty darn good when we bought it a few years ago. It’s on our radar still, but its growth has got to reaccelerate for it to justify the valuation of 20x next year’s earnings which is where it is right now.
Q. Is there a price level where Warner Brothers Discovery (WBD) actually becomes attractive?
A. WBD has more than twice as much debt as it does in market cap here. With that much debt, it’s a long way from creating value for shareholders. I keep wanting to like it and have worked on it several times over the last few months, but the debt keeps me out of it.
Q. Any uranium stock you like?
A. Not really at this point. Always looking at them though.
Q. The notorious short seller Jeremy Grantham in his climate fund owns Sunrun (RUN), Darling Ingredients (DAR), and Ameresco (AMRC). Are any of these buys?
A. I am not a fan of Sunrun. I had never heard of DAR but here’s what it is and it looks interesting enough to learn more about: “Darling Ingredients Inc. develops, produces, and sells natural ingredients from edible and inedible bio-nutrients in North America, Europe, China, South America, and internationally. The company operates through three segments: Feed Ingredients, Food Ingredients, and Fuel Ingredients. It offers ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, industrial, fuel, bioenergy, and fertilizer industries. The company also collects and transforms various animal by-product streams into useable and specialty ingredients, such as collagen, edible fats, feed-grade fats, animal proteins and meals, plasma, pet food ingredients, organic fertilizers, yellow grease, fuel feedstock, green energy, natural casings, and hides. In addition, it recovers and converts used cooking oil and animal fats, and residual bakery products into valuable feed and fuel ingredients. Further, the company provides environmental services, including grease trap collection and disposal services to food service establishments. It primarily operates under the Rendac, Sonac, FASA, Ecoson, Rousselot, Gelnex, and CTH brand names. The company was formerly known as Darling International Inc. and changed its name to Darling Ingredients Inc. in May 2014. Darling Ingredients Inc. was founded in 1882 and is headquartered in Irving, Texas.” 1882?! And AMRC also looks interesting enough for Bryce and me to dig into deeper: “Ameresco, Inc., a clean technology integrator, provides a portfolio of energy efficiency and renewable energy supply solutions in the United States, Canada, Europe, and internationally. It operates through U.S. Regions, U.S. Federal, Canada, Europe, Alternative Fuels, and All Other segments. The company offers energy efficiency, infrastructure upgrades, energy security and resilience, asset sustainability, and renewable energy solutions for businesses and organizations. It designs, develops, engineers, and installs projects that reduce the energy, as well as operations and maintenance (O&M) costs of its customers’ facilities; and projects primarily include various measures customized for the facility and designed to enhance the efficiency of building systems, such as heating, ventilation, cooling, and lighting systems. In addition, the company offers renewable energy solutions and services, such as the construction of small-scale plants that the company owns or develops for customers that produce electricity, gas, heat, or cooling from renewable sources of energy and O&M services; and electricity, processed renewable gas fuel, and heat or cooling produced from renewable sources of energy. Further, the company sells photovoltaic (PV) solar energy products and systems, as well as provides consulting, and enterprise energy management services; and operates wind farms. It serves the federal, state, local governments, healthcare and educational institutions, airports, public housing authorities and public universities, municipal utilities, and commercial and industrial customers. As of December 31, 2023, the company owned and operated 185 small-scale renewable energy plants and solar PV installations. Ameresco, Inc. was incorporated in 2000 and is headquartered in Framingham, Massachusetts.” Thanks, we’ll let you know if we end up liking them.
Q. What’s your best long puts or short idea?
A. Hmm, let me look over what we have puts/shorts on for the hedge fund. In alphabetical order: Russell 2000 ETF (IWM), Microsoft (MSFT), Southern Copper Company (SCCO), SiTime (SITM), and the bitcoin miners ETF (WGMI).
I leave you all with a picture of my two pups helping me run the hedge fund last week. They’re not the best stock analysts, but they are great for the heart.
